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Netflix fragments its brand in a self-made disaster

It can't be a fun week to be a marketer at Netflix. A year ago Netflix seemed unassailable.

Now its fate may be in the hands of the very Hollywood studios it bested and a 'pot-smoking guy' who owns its new brand on Twitter.

Just a year ago, an Econsultancy post
concluded that movie studios missed their streaming video opportunity,
and that Netflix, with a surging stock price had all but eaten their
lunch.

That was a fair assessment, then. After all, Netflix still accounts for a staggering 20% of US internet
traffic during prime television viewing hours. That gives it a future as bright as any entertainment network.

Meanwhile, competitors like Hulu are falling apart, Apple TV is still
managed like a corporate hobby, and GoogleTV is stymied by the networks.

But Netflix is no longer above the fray. You see,
the future hasn't been arriving fast enough for the Netflix business
model. Sending
DVDs through the mail is costly and it drives lots of operational
overheads, which otherwise could be spent on licensing desperately needed
streaming
content.

Though Netflix has a huge subscriber base, new "web only"
competitors will be able to grow faster than them. That's the source of
the huge multichannel mistake of the Netflix ill-fated price increase. Then
came a subscriber insurrection, reduced growth estimates for Wall
Street, and a tumble in the firm's stock price of 27% in just the last
week.

So that's the background for what seems like a frantic move this week, Netflix is splitting off its DVD and video game
by mail business in to Qwikster.

The US first sale doctrine

Yes, this fragments the Netflix brand and
customer experience, and that's bad. However, potentially worse, it loses what has been an ace in the hole for
Netflix: the first-sale doctrine.

All anyone needs to do to rent a
physical DVD to others is to legally purchase it first. This meant
Hollywood couldn't freeze Netflix out of renting DVDs; on-demand
streaming requires licensing.

How the mighty have fallen

With an unbundled offering, Netflix seems far more assailable. But
before Netflix can take on Hollywood studios, Walmart, Redbox and others
who want to take a piece of their business, they need to take on a guy
with a dormant Twitter account.

Until yesterday the Qwikster Twitter account was identified by an icon of a pot smoking Elmo from the children's television show Seasame Street.

When Jason Castillo got 9,000 new Twitter followers in a single day, and found his in-box
clogged with offers to buy his account, he realized that his dormant
Twitter account, Qwikster, really had some real value.

In fact, in the day since Netflix renamed its mail-by DVD using that
name, his life has taken on sort of a reality tv show vibe.

And he's
letting it show with a stream of partially conscious nonesense, mixed
with musings about selling the account, that must be driving brand
managers at Netflix crazy.

Others are even starting to parody his "half baked" style on other accounts.

This is further proof that Qwikster was a knee-jerk brand
change: its social media accounts were not secured before the brand
launch.

Had they performed a trademark search with a firm like
ThomsonReuters or CoreSearch they'd have been alerted to this.

Normally
brands use services like Knowem to lock down names of hundreds of
scattered social media services before launch.

The moment for them to pick-up the account for peanuts has passed.
While Twitter's terms of use bar selling accounts, Mr. Castillo has
cleverly suggested that if someone were to pay a six figure sum to a
needy friend of his, that he'd be inclined to give Qwikster his, until
recently unused, Twitter account.

Netflix, meet your studio masters

Dumping the DVD business may be necessary for Netflix, but that has to be just the start of something bigger. Without a
brilliant licensing deal to bring its subscribers over the
digital chasm it has decided to cross, this will have been for nothing.

So, suddenly, the fate of the previously unassailable Netflix is in
the very hands of the Hollywood studios it bested. But before it can take
them on, someone at Netflix needs to deal with a guy with a pot-smoking
Elmo on his icon. This can't be a fun week to be a Netflix marketer.

Dave Wieneke leads Digital Strategy at Connective DX, and is a graduate lecturer on Digital Marketing at Rutgers Business School. He writes on the future of digital marketing at UsefulArts.us and he can be reached through Twitter and LinkedIn.

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Comments (1)

Chuck Bergman

Another major issue that no one seems to be mentioning is the sheer lack of movies available thru Netflix streaming. NO new movies are available and very, very few movies made within the last 5 years. You can't even stream the first Harry Potter movie which came out 10 years ago.

Maybe the want to focus heavily on streaming TV, but I know that I'm not interested in the service if I can't just order the movie I want, right now.

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